Modelling systemic price cojumps with Hawkes factor models
Instabilities in the price dynamics of a large number of financial assets are a clear sign of systemic events. By investigating a set of 20 high cap stocks traded at the Italian Stock Exchange, we find that there is a large number of high frequency cojumps. We show that the dynamics of these jumps is described neither by a multivariate Poisson nor by a multivariate Hawkes model. We introduce a Hawkes one factor model which is able to capture simultaneously the time clustering of jumps and the high synchronization of jumps across assets.
Evolution of correlation structure of industrial indices of U.S. equity markets
We investigate the dynamics of correlations present between pairs of industry indices of US stocks traded in US markets by studying correlation based networks and spectral properties of the correlation matrix. The study is performed by using 49 industry index time series computed by K. French and E. Fama during the time period from July 1969 to December 2011 that is spanning more than 40 years. We show that the correlation between industry indices presents both a fast and a slow dynamics. The slow dynamics has a time scale longer than five years showing that a different degree of diversification of the investment is possible in different periods of time. On top to this slow dynamics, we als…
Modelling Systemic Cojumps with Hawkes Factor Models
Instabilities in the price dynamics of a large number of financial assets are a clear sign of systemic events. By investigating a set of 20 high cap stocks traded at the Italian Stock Exchange, we find that there is a large number of high frequency cojumps. We show that the dynamics of these jumps is described neither by a multivariate Poisson nor by a multivariate Hawkes model. We introduce a Hawkes one factor model which is able to capture simultaneously the time clustering of jumps and the high synchronization of jumps across assets.